Mama's Creations Q2 2026 Earnings Call: Contradictions Emerge on Gross Margins, Costco Partnership, Chicken Pricing, Crown Integration, and M&A Strategy

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 8, 2025

Financials Results

• Revenue: $35.2M, up 24% YOY (vs $28.4M prior year)
• EPS: $0.03 per diluted share, flat YOY (net income $1.3M vs $1.1M prior year)
• Gross Margin: 25%, compared to 24% in the prior year

Guidance:

• Post-acquisition revenue run-rate ~ $200M.
• Crown One expected to be accretive in fiscal 2026.
• Normalized combined gross margin near-term in low-20% range; targeted improvement to mid-to-high-20% within 12–18 months via efficiencies, procurement, and throughput gains.
• Trade spend will be flexed based on commodity costs; Crown’s private-label mix implies lower trade rates.
• Q4: Costco national multi-vendor mailer for meatballs; not budgeted, expected to drive incremental volume.
• No major capex needed at Crown; ability to redeploy equipment reduces planned capex elsewhere.
• Capacity expanded (six grills in Farmingdale; Bayshore adds shifts/equipment) to support continued growth in club, mass, and paninis.

Business Commentary:

* Revenue and Gross Margin Trends: - Mama's Creations reported revenue growth of 24% to $35.2 million for the second quarter of fiscal 2026 compared to $28.4 million in the same year-ago quarter. - Gross profit increased by 28% to $8.8 million, or 25% of total revenues. - This growth was driven by volume gains from new items, expanding customer base, and effective cost management, including strategic pricing actions.

• Acquisition and Integration:
• Mama's Creations acquired Crown One Enterprises for $17.5 million, adding $56 million in revenue and nearly 200 experienced operators.
• The acquisition is expected to add significant production capacity, especially in chicken processing, and enhance customer access to hard-to-break-into retailers.

• This acquisition is part of Mama's Creations' strategy to expand capabilities and operational scale through strategic acquisitions.

• Market Dynamics and Consumer Behavior:

• Private label brands outpaced national brands by 4x during the six months ending June 15, 2024, with refrigerated products leading with 13% sales growth.
• Market trends show consumers seeking out refrigerated products for healthy meal solutions and protein-rich options.

• This aligns with Mama's Creations' product offerings and positioning in the deli-prepared foods market.

• Operational Efficiency and Cost Management:

• Freight costs were reduced by 60 basis points from the previous year, contributing to operational efficiency improvements.
• Implementation of warehouse management systems and updated NetSuite upgrades enhanced inventory control and cost monitoring.
• These efforts are part of Mama's Creations' ongoing strategy to manage costs and increase operational effectiveness.

Sentiment Analysis:

• Revenue rose 24% to $35.2M; gross margin improved to 25% from 24%. Crown One is accretive this fiscal year with a combined revenue run-rate of ~$200M. Q4 will feature a first-ever national Costco mailer. Cash increased to $9.4M while total debt fell to $2.7M. Management expects to lift margins to mid/high-20% over 12–18 months.

Q&A:

• Question from Ryan Reyes (Lake Street Capital Markets): How should we think about organic gross margins in 2H given chicken commodities and trade spend—does the rebound still hold?
  Response: Chicken costs are down ~$1/lb and throughput is up, so they expect organic gross margins to improve in 2H while flexibly managing trade.

• Question from Ryan Reyes (Lake Street Capital Markets): On Crown’s ~$56M revenue, is it growing and will you rationalize SKUs/channels?
  Response: They’ll patiently assess and prune low-velocity, low-margin SKUs while leveraging added capacity and cross-sell; expect healthy, sustainable growth post-integration.

• Question from Eric Des Lauriers (Craig Alleman Capital Group): Recap Costco progress and the importance of the national MVM—does this move you toward everyday status?
  Response: They advanced from one region to all eight, then to digital MVM, and now a Q4 national print MVM; strong execution could lead to an everyday national item.

• Question from Eric Des Lauriers (Craig Alleman Capital Group): How do Crown’s MAP capabilities differ from yours, and what do they add?
  Response: Crown brings more equipment and years of MAP expertise, adding capacity and know‑how that Mama’s will cross-utilize across plants and customers.

• Question from Eric Des Lauriers (Craig Alleman Capital Group): How will trade promotion plans adjust with Crown’s lower gross margin profile?
  Response: They dynamically balance trade with margin; lower chicken provides room, and Crown’s private-label mix requires less trade, making spend highly flexible.

• Question from Eric Des Lauriers (Craig Alleman Capital Group): Does the gross margin ‘high-20s’ trigger move lower now that combined margins are in the low-20s?
  Response: No reset; they’ll be patient in integration and aim to lift margins toward historical levels, as achieved previously with Creative Salads.

• Question from George Kelly (Roth Capital Partners): What is Crown’s revenue capacity and required capex to reach it?
  Response: No major capex is needed; the facility was recently upgraded (~$6M by prior owner), and equipment can be redeployed—potentially reducing planned capex elsewhere.

• Question from George Kelly (Roth Capital Partners): Can the three facilities roughly double current revenue run-rate (~$200M)?
  Response: Yes; added equipment/shifts and efficiency gains support doubling capacity over time.

• Question from George Kelly (Roth Capital Partners): Update on Sam’s Club panini performance and back-half expectations.
  Response: The chicken pesto panini is outperforming with expanded doors and continued orders; they expect further expansion, aided by Crown’s production flexibility.

• Question from Nicholas Sherwood (Maxim LLC): Detail Walmart progress from marketing and where that relationship goes this year.
  Response: From zero last year to ~1,800–2,000 doors on a four‑count chicken item; collaborative marketing supports continued mass-channel growth.

• Question from Nicholas Sherwood (Maxim LLC): How are you approaching the convenience channel after Sheetz—priority and strategy?
  Response: Convenience is a focus; they’re in key distributors (Sysco, Dot, KeHE, McLane) and are testing channel-specific products/pricing to add banners.

• Question from Nicholas Sherwood (Maxim LLC): How does the Crown acquisition affect planned improvements at East Rutherford?
  Response: They’ll continue upgrades but will repurpose Crown equipment (e.g., shredder, stuffing machines), lowering previously planned capex under a one-plant/three-locations model.